The scheme applies to any UK organisation (or corporate group containing a UK entity) that qualifies as a “large undertaking.” That means meeting either of the following conditions on the qualification date:

• 250 or more employees, or
• An annual turnover exceeding £44 million AND an annual balance sheet total exceeding £38 million

Note: these thresholds have not changed for Phase 4. The government considered aligning them with the Streamlined Energy and Carbon Reporting (SECR) framework but decided against it, so the same criteria apply.

For corporate groups, the rules work at group level , if any single UK entity within the group qualifies as a large undertaking, the entire group must participate. This catches many businesses that might otherwise assume their individual subsidiary is too small to qualify.

If your organisation completed ESOS Phase 3, you will know the process involved appointing a qualified Lead Assessor to audit your energy use across buildings, industrial processes, and transport. Phase 4 retains this structure but with some important updates:

New requirements introduced through the 2023 Amendment Regulations include:

• Strengthened standards for energy audits, meaning assessors must follow more rigorous methodology.
• A mandatory ESOS Report , a formal record of the assessment, covering the compliance route used, energy saving opportunities identified, and savings achieved since the last compliance date. This report must be shared with all relevant group entities.
• A mandatory Action Plan, submitted within 12 months of the compliance period end, setting out how your organisation plans to act on the recommendations. For Phase 3, this deadline was 5 December 2024.
• Two Annual Progress Updates in the years following the action plan, reporting on progress against commitments. For Phase 3, these fall due on 5 December 2025 and 5 December 2026.
• Public disclosure of high-level recommendations , your key findings are now published, adding reputational accountability to what was previously a more private compliance exercise.
• Each action plan and progress update must be signed off by a board-level Director, making this a matter of formal executive accountability.

Display Energy Certificates (DECs) and Green Deal Assessments (GDAs) are being removed as alternative compliance routes for Phase 4. If your Phase 3 provider relied on these as shortcuts, you’ll need an approach that meets the updated standard.

What does this mean in practice? If you were disappointed with your Phase 3 provider , perhaps because the assessment felt superficial, recommendations were generic, the process was poorly managed, or the new 2023 reporting requirements weren’t clearly handled , Phase 4 is the right moment to find a provider who delivers real value, not just box-ticking compliance.

The qualification snapshot for Phase 3 was 31 December 2022. Many businesses that were below the thresholds at that point have grown since. If your headcount has crossed 250, or your turnover and balance sheet have both moved above the thresholds, your organisation may well qualify for Phase 4, with the relevant snapshot date being 31 December 2026.

Critically, if you are part of a corporate group, it is worth reviewing the group structure as a whole. A group qualifies if any UK member entity meets the large undertaking definition , so organic growth or acquisition activity since 2022 could bring you into scope for the first time.

Being new to ESOS is not a disadvantage. Starting fresh with a good provider means you can build a robust, well-evidenced compliance process from the outset, without the legacy of a rushed or poorly executed previous phase.

For a Finance Director, the key steps are:

1. Confirm whether you qualify. Assess your headcount and financials against the thresholds, considering your full corporate group structure.
2. Measure your total energy consumption. This covers all energy used by buildings, industrial processes, and transport assets within scope, measured in kWh. You’ll then identify “areas of significant energy consumption” , those using 90% or more of total consumption , which must be audited in detail.
3. Appoint a Lead Assessor. This must be a qualified professional from an approved register (such as IEMA, CIBSE, or Energy Institute). They oversee the audit and sign off that the assessment meets scheme requirements.
4. Carry out the assessment. This can be done via a full energy audit, ISO 50001 certification (if you hold it), or a combination. The audit examines what energy you use, where, and what can realistically be saved.
5. Produce the ESOS Report and Evidence Pack. The Report summarises findings; the Evidence Pack is the underlying documentation you must retain and make available if the Environment Agency requests it.
6. Notify the Environment Agency. Compliance is confirmed by submitting a notification through the government’s online MESOS system, signed off by a board-level director.
7. Submit your Action Plan and Progress Updates. These demonstrate you are acting on the findings, not just filing paperwork.

The Environment Agency and its devolved equivalents can issue compliance notices, enforcement notices, and penalty notices. The financial penalties under the 2023 Regulations are significant:

• Failure to undertake an energy audit: up to £50,000 fixed penalty, plus £500 per working day until the breach is remedied (up to 80 days)
• Failure to notify compliance: up to £5,000 fixed penalty, plus £500 per working day (up to 80 days)
• Failure to maintain records: up to £5,000, plus the regulator’s auditing costs

Non-compliance is also published , your organisation’s name appears on a public register of those who have failed to meet their obligations. For many businesses, the reputational risk is at least as significant as the financial penalty.

ESOS is not optional, and it isn’t just an environmental formality. Done well, it identifies material opportunities to reduce energy costs , ESOS has been estimated to have delivered £1.12 billion in energy bill savings across participants. Done poorly, it creates compliance risk, regulatory exposure, and reputational damage with no commercial benefit.

For organisations that had a poor experience in Phase 3, the 2023 changes have raised the bar. A provider who delivered a tick-box assessment last time will struggle to meet the strengthened audit standards, report requirements, and public disclosure obligations now in force. Phase 4 is your opportunity to choose a provider who treats ESOS as the strategic business exercise it is , identifying genuine savings, producing a credible Action Plan, and managing the process so that director sign-off carries real meaning.

For organisations newly qualifying for Phase 4, the compliance deadline of 5 December 2027 may feel distant, but audits take time to commission and execute properly, and the qualification date of 31 December 2026 is approaching quickly. Starting early means better access to qualified Lead Assessors and a less pressured process , the final months before any ESOS deadline tend to see both capacity constraints and higher costs in the market.

Either way, the message is the same: the time to act on Phase 4 is now.